DIFC Forum: Islamic Finance Can be a Role Model for the Global Economy

“Islamic banks Should Look at Acquiring Large Conventional Banks to Become Leaders and Innovators in the Global Economy”

As the global economy creates a new financial architecture, incorporating lessons from the global financial crisis, Islamic banking could emerge as a role model because of its focus on ethical investments.

This was one of the key messages that emerged from a panel discussion on Islamic Finance that took place on the first day of DIFC Forum, the second major business conference that forms part of DIFC Week, the Dubai International Financial Centre’s (DIFC) prestigious annual series of business events.

Participants in the session titled ‘What will it take to lead the next generation of Islamic Finance’ included Khalid Abdulla-Janahi, Group Chief Executive of Dar Al-Maal Al-Islami (DMI) and Chairman of Ithmaar Bank; Hari Bhambra, Senior Partner, Praesidium LLP; Prof. KC Chan, Hong Kong Secretary for Financial Services and the Treasury; and Iqbal Ahmed Khan, CEO, Fajr Capital.

Panelists were of the common opinion that the global financial crisis will have an impact on the Islamic Finance industry. However, the industry has scope for considerable long-term growth. “If you look at the demographics of the market, for example in Islamic countries like Egypt, there is a large number of people who need banking services,” said Iqbal Ahmed Khan. “There is a large market out there that is underserved,” he pointed out.

Furthermore, the ethical investment principles on which the sector operates will allow Islamic finance institutions to align themselves with corporate social responsibility (CSR) groups to create a wider appeal for Islamic Finance products, Khan said.

Khalid Abdulla-Janahi said that during the financial crisis, the industry could witness several mergers and acquisitions that could transform the industry. He urged Islamic finance banks to look at acquiring large conventional banks that would give them the ability to become leaders and innovators in the global economy.

The role played by regulators is critical to the progress of Islamic Finance. Many panelists felt that Islamic Finance institutions need to be regulated differently from conventional banks and regulators are sometimes extremely stringent on the Islamic finance sector. “The operational framework can either hinder or promote Islamic finance. If you over-regulate it you are going to strangle it,” said Hari Bhambra.

Khan argued that Islamic Finance should play a role in finding solutions to support people who belong to the most vulnerable sections of society. “The financial crisis will affect poverty-reduction budgets around the world and there is a risk of increased polarisation between the rich and the poor. Islamic Finance can play a role in helping the poorest sections of society by finding creative solutions to support them.”

When asked to identify the key areas of improvement within Islamic Finance, panel members named building the capacities of practitioners and educating regulators as critical needs.

The DIFC Forum, being held on 24 and 25 November, is discussing critical issues like the impact of the global financial crisis on the region, the next generation of Islamic Finance, emerging markets in and after the financial crisis, and energy geopolitics in an era of structural change.

With over 70 speakers from the world’s major international markets, 21 separate sessions, and a televised debate on how to get confidence back in the global financial markets, DIFC Week will address the most important issues faced by businesses in the region both in the current financial climate and in the future. Topics to be discussed at the four-day event include growth strategies, opportunities and major challenges for family businesses both locally and internationally, the economic outlook for the world and the GCC in 2009, attracting foreign investment and human capital in the Arab world, and the practicalities of establishing operations in Dubai.

Closing DIFC Week will be a Conference on 26 November titled: ‘The Inside Track on Dubai’, which will involve a series of commercial, regulatory and teaching streams that discuss the practicalities of establishing operations in Dubai covering issues such as raising capital and understanding cultural aspects of living and working in the Emirate.

DIFC Week is proud to be supported by its Platinum Sponsors including Deutsche Bank and Abraaj Capital, and Sponsors who include Itau Securities and Goldman Sachs . In addition, the DIFC Week Conference is sponsored by Alvarez & Marsal, Conyers, Dill & Pearman, Emirates NBD, Grant Thornton, HAYS, International Compliance Training (ICT) Middle East, Kershaw Leonard, Latham and Watkins, M: Communications, Norton Rose and Union Properties while the DIFC Week Gala Networking Reception is sponsored by Sungard. The DIFC Summit is run in association with the Tharawat Family Business Forum.

The Dubai International Financial Centre (DIFC) is an onshore hub for global finance. It bridges the time gap between the financial centres of Hong Kong and London and services a region with the largest untapped emerging market for financial services. Since November 2004, over 650 firms have registered at DIFC. They operate in an open environment complemented with world-class regulations and standards. DIFC offers its member institutions incentives such as 100 per cent foreign ownership, zero tax on income and profits and no restrictions on foreign exchange. In addition, their business benefits from modern infrastructure, operational support and business continuity facilities of uncompromisingly high standards. In March 2008, the City of London’s Global Financial Centres Index (GFCI) ranked Dubai as the region’s fastest growing financial hub. For more information please visit http://www.difc.ae.

About Tharawat Family Business Forum:The Tharawat Family Business Forum is a network of family-owned enterprises in the Arab World. The organisation provides a platform for the exchange of ideas and experiences on business and management issues related to family businesses in the Arab world. Tharawat’s vision is to become the first-choice networking and mutual-assistance forum for family businesses in the Arab world. Through its network of members, Tharawat aims to encourage collaboration and alliances among family-owned and controlled firms in the region. It provides its members specialised education and helps them leverage business opportunities in the region and beyond. The forum seeks to bring a new focus on the business, social and cultural challenges facing family firms in the region. It promotes and sponsors research that helps advance the sustainable development of family businesses. It also works to raise public awareness of new developments within the family business sector. The Tharawat Family Business Forum has a governance structure designed to guarantee the transparency of its activities and its receptivity to high-quality inputs from both members and external experts. The members of Tharawat constitute an innovative and committed community of family-owned businesses, working together to improve collaboration, business growth, and prosperity. For more information please visit (http://www.tharawat.org )

About Deutsche Bank:

Deutsche Bank is a leading global investment bank with a strong and profitable private clients franchise. A leader in Germany and Europe, the bank is continuously growing in North America, Asia and key emerging markets. With 81,308 employees in 75 countries, Deutsche Bank offers unparalleled financial services throughout the world. The bank competes to be the leading global provider of financial solutions for demanding clients creating exceptional value for its shareholders and people.

Deutsche Bank’s commitment in the MENA region is more than a century old, beginning with the Bank’s financing of the construction of the Baghdad railway. Deutsche Bank opened its first office in Cairo in 1959, followed in the early seventies by an office in Bahrain. In 1999, Deutsche Bank embarked on a regional expansion drive across the GCC which began with the opening of an office in the UAE’s Capital Abu Dhabi in 1999, followed by two offices in Dubai: a representative office inaugurated in 2001 and a branch at the Dubai International Financial Centre (DIFC) in 2005. In April of 2006, Deutsche Bank opened a branch in the Kingdom of Saudi Arabia, in the capital Riyadh. In November of 2007, Deutsche Bank opened its branch in the Qatar Financial Centre in Doha. Deutsche Bank AG in the MENA region offers the full range of investment banking, asset management; private wealth management; and global transaction banking services. Deutsche Bank AG is well recognized for its leading role on some of the most prestigious regional transactions. The Bank is the recipient of several regional and international awards in recognition for its achievements in investment banking and Islamic finance in the region.

Dubai-based Abraaj Capital is the largest private equity company in the Middle East and North Africa with more than US$ 7.5 billion of assets under management. Established in 2002, the company has led the way in developing the private equity industry in the region. Abraaj Capital Ltd. is licensed by the Dubai Financial Services Authority, which operates according to international regulatory standards. The company’s more than 165 ‘best in class’ employees are drawn from the global talent pool, and span more than two dozen nationalities. Abraaj Capital invests in the growing Middle East, North Africa and South Asia (MENASA) region and has executed some of its landmark deals. These include the US$ 1.41 billion purchase in 2007 of Egyptian Fertilizers Company, the largest leveraged buy-out in MENA. Abraaj Capital has won several industry awards, including ‘Middle Eastern Private Equity Firm of the Year’ from Private Equity International (2005, 2006 & 2007). On average, Internal Rates of Return exceed 50 percent.